OLD TOWN, Maine — Although the sale of the bankrupt Red Shield mill should become final next week, it will take “several months” before the dust from the sale — and the company’s debts — settles, according to its attorney.
“Literally, you’d have to go through the claims one by one,” Red Shield attorney Bob Keach of Portland said Friday. “There’s not going to be enough cash to pay unsecured claims 100 cents on the dollar.”
After the New York investment group Patriarch Partners closes the deal with Red Shield, the bankrupt company should have almost $19 million in cash. The first use of that money will be to pay its secured claims, Keach said, because those accrue interest. Those secured claims include about $8.3 million owed to the Minneapolis hedge fund Whitebox and about $900,000 still owed to the Finance Authority of Maine.
The authority initially had lent $1 million to Red Shield in its Economic Recovery Loan Program.
“We are very, very happy that the sale went through. We think the sale is going to be beneficial for the city of Old Town,” said Beth Bordowitz, acting chief executive officer of FAME. “In regard to our claim, we were an early supporter of Red Shield in Old Town. It was a risk at the time, and we’re happy to get these funds back. Those loans will revolve right back in and support Maine businesses.”
After the loans to Whitebox and FAME are paid off, Red Shield will have to settle about $1 million in lien claims from parts suppliers and contractors, Keach said, and then pay Preti Flaherty, its former law firm, about $700,000.
All of those debts are secured debts.
About $7 million to $8 million in unsecured debts will remain after those are paid off, according to the attorney. Those are primarily unsecured trade claims, such as paying a creditor who supplied chemicals to the pulp mills. And those debts most likely will not be repaid in their entirety.
“There will be enough to pay 50 cents and maybe even 80 cents on the dollar,” Keach said.